Price and Costs

On this page, you’ll find the Center’s research on the complex world of pharmaceutical pricing. Our focus will be breaking down current pharmaceutical pricing structures and processes and potential reforms to improve efficiency and innovation; evaluating the impact of regulatory-created inefficiencies such as Pharmacy Benefit Managers (PBMs) and the 340B program; and analyzing how policy proposals such as price controls and drug importation would undermine competition.

The Trump administration recently announced a $1.6 billion cut to the badly abused "340B" program, which forces pharmaceutical companies to sell medicines to hospitals that treat significant numbers of poor patients at steep discounts. A bipartisan group of senators -- including supposed fiscal hawks like Sens. John Thune, R-S.D., and Rob Portman, R-Ohio -- are trying to block the reform. That's disappointing. Hospitals are exploiting 340B to enrich themselves at the expense of poor patients. Their abuse of the program drives up...

Tomorrow, the Senate Health, Education, Labor & Pensions Committee (HELP) will discuss a proposed alteration to Medicare. The proposal comes from a report released in late November by the National Academies of Sciences, Engineering, and Medicine. NASEM urges Congress to allow federal bureaucrats to negotiate Medicare drug prices directly with pharmaceutical companies. Currently, private insurance companies conduct these negotiations. The academies believe the federal government could use its bulk purchasing power to obtain lower drug prices for Medicare beneficiaries. NASEM is wrong. Giving the government negotiating authority would stifle...

Abraham Kaplan famously noted that if you, “give a small boy a hammer, he will find that everything he encounters needs pounding.” Put differently, solving problems requires the right tool, not the convenient tool. Congress should remember this wisdom in its upcoming deliberations regarding the cost of prescription drugs. The convenient tool when it comes to the health care system’s affordability problem is price controls. After all, the government can limit price increases in any part of the health care system...

The U.S. health care system needs systemic reforms that comprehensively address the problems of declining quality and rising costs. Alas, beneficial systemic reforms will not be implemented any time soon. There are still opportunities for Congress to implement tailored reforms that can help address these problems in the near term. One such opportunity is reforming the out-of-control 340B drug pricing program (the federal drug discount program created under the Veterans Health Care Act of 1992). The intent of the 340B program...

Imagine a pharmaceutical market designed by Lewis Carroll’s Mad Hatter. In contrast to almost every other market, he might begin by charging wholesale prices that are higher than retail prices. He would then make sure that the higher wholesale price goes, the lower retail prices can become. And finally, he would ensure that not everyone could purchase their medicines at the low retail prices – although the reason why would be convoluted and random. While we can be certain that the...

The refrain that pharmaceuticals are driving the health care affordability problem has been repeated so often that it is becoming an illusory truth – people believe it to be true simply because they have heard it repeated so often. Obviously, repeating the same incorrect statement over and over again does not make it so. It does squander valuable time as legislatures continually consider bills with no hope of improving the quality, or reducing the costs, of health care. For instance, California is...

The drama of “repeal and replace” resembled an unfunny version of a Monty Python skit, continuously claiming that it was “not dead yet”, and even that it was “getting better” only to be put out of its misery in the end. The end of repeal and replace will not end the push for health care reform. There are simply too many problems that must be addressed – one way or another. One of these issues gaining traction is the growing push...

Click here to read PRI's new issue brief, The Economic Costs of Pharmacy Benefit Managers Express Scripts, the largest pharmacy benefit manager (PBM) in the nation, is discovering just how much customer service matters. It may also be discovering that suing your biggest customer in court is generally not considered good customer service. Should Anthem Inc. withdraw its business from Express Scripts as it has indicated, then clearly the largest for-profit health insurance company will have made the determination that the value...

The growing problem of health care affordability requires prompt and effective policy solutions. However, just as the wrong medical diagnosis will not cure a patient, and may make the patient even sicker, the wrong policy solution will not address the U.S. health care affordability problem, and may even worsen the problem. Proposals to import pharmaceuticals from overseas are the wrong policy solution. Nevertheless, both Hillary Clinton and President Trump advocated for drug importation on the campaign trail; and, Senator Bernie Sanders...

Imagine if you never had to directly pay for your morning cup of coffee again. Instead, a coffee insurer guaranteed that, for a small co-pay, you could enjoy a cup of coffee every morning. Sounds good? The catch, and there is always a catch, is the caveat “directly pay.” In this bizarre world, you would still be paying for your cup of coffee every morning, but instead of paying your favorite barista, you would now pay your local coffee insurer. But, bureaucracy loves...

President Donald Trump is not the only politician saying he is going to work to get drug prices down. Oregon lawmakers are already patting themselves on the back for tackling drug prices. Rep. Mitch Greenlick (D-Portland) says the measure, Oregon House Bill 2387, could be a model for national reform. "If we can actually get it done," he recently explained, "it will show the country how to get those costs down." Let's hope he's wrong. The reform he's supporting is nothing...

A recent oped in The Hill by MedShadow Foundation founder Suzanne Robotti claims that permitting Americans to import prescription drugs from Canada would save dollars and lives. It would do neither. Prescription drug importation has several notable proponents, like Sens. John McCain (R-Ariz.), Amy Kobuchar (D-Minn.), and Bernie Sanders (I-Vt.), along with President Donald Trump. Without question, all of them sincerely want to make medicines more affordable. But importation wouldn't save patients much money. Instead, it would hamstring the Food and...

Minnesota Senator Amy Klobuchar just introduced a federal budget amendment that would legalize the importation of foreign prescription drugs. This particular policy change has long topped Democrats' health care wish list, but shockingly, they might find support across the aisle this year, as President-elect Trump has spoken glowingly of importation. The bipartisan support doesn't make the proposal any better an idea. Legalizing importation would expose Americans to substandard foreign pills and undermine domestic drug innovation. Importation proponents say that American patients could...

The imminent repeal of the Affordable Care Act (aka Obamacare) is garnering most of the health care headlines, and rightly so. But, the focus on Obamacare should not overshadow other health care modifications that may be considered during the 115th Congress. Paramount among these proposals is the issue of drug importation. Currently, it is illegal to import drugs into the U.S. from other countries. It is rumored that several Senators will, in short order, attach amendments to the current budget resolution...

California is losing the battle against opioid addiction. Every 45 minutes, someone in the Golden State overdoses. Fifty percent more people overdose today than in 2006. Fortunately, the Food and Drug Administration just approved the anti-addiction treatment Probuphine. It’s an implant placed in a person’s upper arm, where it releases a steady stream of an anti-addiction drug called buprenorphine to help addicts stay sober. Medical breakthroughs like this one could become rarer if a ballot measure under consideration in California is ratified...